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SCOREBOARD: Cliff diving

International stocks see further declines on fiscal cliff wrangling but US house prices rise to highest level in over 2 years.

US new home sales rose 4.4 per cent to a 377,000 annual rate in November – the highest since April 2010. The Conference Board consumer confidence index fell from 71.5 to 65.1 in December, well below forecasts.

European shares were mostly flat as fresh concerns that US Congress would fail to reach a deal to avoid the fiscal cliff weighed on sentiment. Volumes remained light in a holiday-shortened week. The benchmark FTSEurofirst 300 and the UK FTSE closed broadly flat while Germany's Dax gained 0.3 per cent. The miners faired marginally better. In London Rio Tinto gained 0.5 per cent and BHP Billiton rose 0.1 per cent.

US stocks fell for a fourth straight session on Thursday after Senate leader Harry Reid warned that a fiscal deal may not be possible before the year-end deadline. The CBOE volatility index – a measure of investor fear – rose by almost 6 per cent to above 20 for the first time in six months. With just over an hour of trade the Dow Jones was down 60 points or 0.5 per cent with the S&P 500 lower by 0.5 per cent and the Nasdaq fell 16 points or 0.6 per cent.

US treasuries rose on Wednesday (yields lower) as the bid for safe-haven assets increased after the US Senate majority leader suggested that a federal budget deal was unlikely before the end-year deadline. US 2-year yields fell by 1 point to 0.27 per cent while US 10-year yields fell 3 points to 1.725 per cent.

The US dollar was broadly higher against major currencies on the fresh uncertainty regarding US fiscal talks. The Euro fell from highs near $US1.3285 to lows of $US1.3215, and held near $US1.3240 in late US trade. The Aussie dollar fell from highs near US103.90c to lows near US103.40c and held near US103.70c in late US trade. And the Japanese Yen fell to a two-year low against the US dollar on expectations that Japan's new government will push for aggressive stimulus policies to drive growth. The yen eased from 85.60 yen per US dollar to ¥86.10 and was near ¥86.00 in late US trade.

World crude oil prices eased in choppy trading as the unresolved US budget talks left open the possibility that tax hikes and spending cuts that could push the US economy back into recession. Brent crude fell by US34c or 0.3 per cent to $US110.73 and Nymex crude fell by US11c or 0.1 per cent to $US90.87 a barrel.

Base metal prices were mostly higher on the London Metals Exchange on Thursday, with the exception of nickel and aluminium. Copper rose to a one-week high in thin trade following upbeat profits from China's industrial companies (up 22.8 per cent in November from a year ago). The gold price settled higher on Thursday supported by the bid for safe-haven assets, but the strengthening US dollar limited gains. Comex gold futures rose by $3 to $US1,663.70 per ounce. And the spot iron ore price was unchanged at $US139.40 a tonne.

Looking to the day ahead, no economic data is released in Australia, while in the US pending home sales figures are due.

Craig James is CommSec's chief economist. Adam Carr is on leave, returning January 7.

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